19jan27-Mistrust of China getting in the way

POSTSCRIPT / January 27, 2019 / Sunday

Mistrust of China getting in the way

By FEDERICO D. PASCUAL JR.

WHETHER it be a Chinese telecommunications big player muscling its way in or a giant shipbuilder moving to take over a shipyard in strategic Subic Bay, one element that keeps getting in the way of clinching the deal is lack of trust in China.

Ironically, China President Xi Jinping is widely regarded in Manila as a BFF (best friend forever) of President Duterte. Worse, the trust issue may be rubbing off on the Philippine leader because of his ill-concealed infatuation with him.

Our sense is that such mistrust pertains only to official policy and action. It does not look like it has seeped down to people-to-people relations between Filipinos and Chinese, whose centuries-old interactions as neighbors antedate the coming of Western colonizers.

Can we Filipinos trust China? The question surfaced again in the award of a franchise to Mindanao Islamic Telephone Co. (Mislatel) as the third telecommunications player in the country. Mislatel is a consortium of Udenna Corp. (35 percent), Chelsea Logistics Holdings Corp. (25 percent), and China Telecom (40 percent).

Udenna and Chelsea are controlled by Dennis Uy, the fast-rising Davao star identified as a Duterte crony. China Telecom is a government-owned Chinese firm, a detail that has raised fears that sensitive data, including state secrets, stored or streaming through the system will be compromised.

Existing telcos already have foreign equity. First Pacific Co. Ltd. of Hong Kong and NTT DOCOMO Inc., the dominant mobile phone operator in Japan, have substantial equity in PLDT. Singapore Telecommunications Ltd., the largest mobile network operator in Singapore, also has a stake in Globe.

It is uncanny that the foreign equity in PLDT (Smart) and Globe has gone unnoticed, at least not in the same way that the Chinese participation in Mislatel has stirred security concerns.

Security issues have also been raised after Chinese firms, one of them state-owned, showed interest in taking over the defaulting South Korean firm Hanjin Heavy Industries and Construction Corp. operating a shipbuilding-shipyard in strategically located Subic Bay.

A question also touching on trust is why eyebrows are raised when it is Duterte who invites or welcomes a Chinese company into a prime area. Why is there no fuss when the investor is from another country?

Surveys have shown that many Filipinos are hesitant to trust China – the state, not its people. This comes as no surprise, considering China’s unfriendly act of grabbing, building up and militarizing maritime features in the Philippines’ exclusive economic zone.

The trust issue is magnified when Duterte is seen, by his acquiescence, as submissive and tolerant of China’s cavalier treatment of the Philippines as if it were just another of its provinces as once suggested by Duterte.

It seems that Chinese leaders and their runners in Manila have unlocked the psychology of the former Davao mayor, making it easy for them to gain his favor, sometimes by dangling (delivering is another matter) promises of massive loans, aid and investments.

• Why some Chinese IT items are banned

LAST AUGUST, President Trump signed into law a ban on the use by the US government and its contractors of technology of Huawei, ZTE and other Chinese communications firms. The restriction is in the Defense Authorization Act.

Huawei and ZTE were tagged as a national security threat in a 2012 House report. Heads of US security agencies have recommended a boycott of their products.

Why do some countries ban Huawei? Will the reasons apply on all state-owned Chinese IT firms? An article last Dec. 19 in The Conversation authored by cyber security experts Frank J. Cilluffo and Sharon L. Cardash of Auburn University in Alabama, said in part:

“The Chinese telecommunications company Huawei is under scrutiny around the globe over concerns that its close ties with the Chinese government present national security threats to the US, Europe and allied countries.

“Huawei, which denies all the allegations against it, is ‘the world’s biggest supplier of telecoms gear’ and has plans to ‘dominate the market’ for the next generation of wireless communications, called 5G. But governments around the world are restricting its prospects and even banning it.”

(Huawei was among the most saleable smartphone brands in 2018. International Data Corp.’s Q3 2018 sales figures show the biggest sellers in descending order: Samsung, Huawei, Apple, Xiaomi, and OPPO. – fdp)

“No Chinese company is fully independent of its government, which reserves the right to require them to assist with intelligence gathering. Huawei is more closely tied to the government: Its founder, Ren Zhengfei, is a former technologist in the People’s Liberation Army. As his company grew, so did international concerns about whether Huawei equipment could be used to spy on companies and governments around the world.

“As far back as 2003, the company was accused of stealing intellectual property, including from US-based network hardware maker Cisco. The companies settled out of court, but Huawei has been accused of stealing other firms’ intellectual property and violating international economic sanctions. Throughout 2018, a flurry of activity has signaled the level of concern in the international intelligence community, and pressure on the company – and other Chinese technology firms – has mounted.

“In February, the heads of six US intelligence agencies told a Senate committee they did not trust Huawei or its rival ZTE, which is also based in China, and would recommend Americans not use the its smartphones or other equipment.

“In mid-August, the US Congress passed, and President Trump signed, a law prohibiting US government agencies from purchasing or using telecommunications and surveillance products from Chinese companies like ZTE and Huawei.

A week later, Australia announced a similar ban. In late November, New Zealand’s intelligence agency barred Huawei from participating in its 5G development, citing ‘significant national security risks.’

“In early December, Japan also announced it was poised to ban Huawei and ZTE from its 5G networks. In mid-December, French telecommunications company Orange, previously known as France Telecom, announced it would not use Huawei equipment in its 5G network.”